Gold Can Rally Past $1,400, But Take Some Chips Off the Table: Weeden

By Brendan Conway

Gold’s return to just under $1,400 per ounce has been swift and remarkable. For Weeden & Co. strategist Michael Purves, it’s a good time to lower your expectations.

Purves Friday recommended clients book the profit from an options strategy he devised a week and a half ago involving the SPDR Gold Trust (GLD). He specifically advised selling a put spread with September expiry on the gold ETF at the $122 and $127 strikes while picking up a call to buy the ETF at $131 — a price the GLD hurdled last week. Friday, the ETF is up 1.8% to $135.12. The options position, which cost $1.35 to start, has soared in value above $5.

AP

Think gold is heading higher? Purves writes to clients it’s a good time to buy a call spread aiming for gold to hit $145 or higher by the middle of next month — just be sure you take your profits on the last few weeks’ surge first.

“While we are encouraged by the performance in gold over the last few weeks, especially against a back drop of higher interest rates, we do take note of the considerable resistance at the $1,410 level and are approaching the next leg of this rally with some caution,” Purves writes.

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Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.